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Sunday, July 15, 2012

Investing in better relations

China and Asean edge towards better ties, mostly because of the risk of a deteriorating relationship.

ASEAN and China made moves during the week to upgrade ties, or at least to talk about the prospect of formal deliberations to do so.

The unusually roundabout manner of this, even for Asean diplomacy, was because much of the basis for it is the highly unlikely and delicate one of contested maritime territory in the South China Sea.

All contending parties have had to tread gingerly, with fingers and toes crossed. But other events have also played a role.

Asean countries had already made clear that regardless of disputes with each other or with China, no external party should get involved. It was not difficult thus to put US diplomats on notice.

So when Secretary of State Hillary Clinton toured South-East Asia this time, with an appearance at the Asean Ministerial Meeting in Phnom Penh, she talked about economic cooperation rather than a “pivot” to “rebalance” against China. It contrasts with her last foray into this region and another Asean meeting.

However, Clinton’s office also had an official announce that the Diaoyu/Senkaku Islands claimed by both China and Japan fell under Article 5 of the US-Japan security treaty. The official declared that the uninhabited islands were under Japan’s jurisdiction, bolstering Tokyo’s claim, and that the US was thus obliged to respond in any conflict.

That made officials in Beijing jump. It also made them seem more conciliatory on the Asean front, in a set of disputes over the Spratly Islands.

China declared on Wednesday that it wanted to strengthen “communication and cooperation” with Asean members with mutual benefit all-round. On the same day at the meeting in Phnom Penh, Thailand announced that it would not allow disputes in the South China Sea to disrupt cooperation between Asean and China.

Thailand is serving as coordinator between Asean and China over the next three years. It is not among the four Asean countries that are claimants to the Spratly Islands along with China and Taiwan.

It has been 10 years since Asean and China signed the Declaration on the Code of Conduct of Parties in the South China Sea (DOC), a non-binding agreement covering “soft issues” like maritime research and environmental protection.

Since then, Asean has wanted to move on to a binding Code of Conduct for the South China Sea (COC). But while China is all for the DOC, saying that it had yet to be implemented fully, it wants to move slower on the COC.

It is still unclear how far serious talks will go in creating a new status quo for the contending claims. On present form, despite all the pleasantries and avowed goodwill, any talks at all are unlikely to achieve anything substantial.

For decades, no specific talks had even been envisaged, let alone conducted satisfactorily and concluded successfully. Now differing positions are being taken over the DOC and the COC, which does not help, amid a general feel good feeling about everyone wanting to feel better, which may not get anywhere.

Prof Zhang Yunling is director of the Centre for the Study of Global Governance at Renmin University in Beijing. The following is part of an exclusive interview he gave during a recent ISIS conference in Kuala Lumpur.

Q. China’s rise has largely been economic; how else will it express its ascendancy in the region and the world?

A. China’s rise has reshaped the region’s economic structure, which has been a very positive development. It will continue to rise, and in other aspects, as well as play an important role.

Compared to the past, there are two differences today. First, it is based on an open economic structure, with close links with other countries, not top-down but in equal partnership as in production networks.

Secondly, there is institutional development, not just gestures as with the old China. There are equal rights, equal treatment of other countries, which are rules-based and multi-layered. We are moving ahead, but it also needs time.

There is greater movement of people, through travel and tourism, and people get to know each other better. There are also more projects for (international) assistance, training and capacity-building.

There is anxiety over China’s military build-up, but it is normal for China to develop its military along with its (economic) development.

One concern is a change in the existing order because China was not a player before. Japan has historical (baggage), the US has been dominant in the past, so there should be a place for China.

Another concern is over dispute settlement: previously there has been cooperative behaviour, now there are bigger armed forces. Yet no other country has so many unsettled disputes as China on both land and sea.

>How do you see China-US ties, today’s most important trans-Pacific bilateral relationship?

This is a very complex matter for China. For others, it is about how to accept a rising China and its role in a positive way.

Germany and Japan before were not bound by factors as China is today: agreements, commitments, shared interests. How China would manage these should not cause other countries to see it as a threat; it is now in a transitional period, without much experience of it.

The US is very important to China in economic terms. So China has to carefully manage relations with the US, to avoid any possible confrontation and seek any possible cooperation.

Both countries have such a close relationship which never occurred before between a rising superpower and an existing superpower. They have to live together and work together.

US technology and its economy are still dominant and important for China. But the US sees China as a threat, and ideologically wants to see China turn into a democratic country.

The US has always tried to make China more like it over the past 100 years, but not successfully – yet it is still trying. US pressure is very clear.

China wants to have its place, and the US has to prepare for that. It is trying to contain China, so China sees this as a threat.

But it’s not a zero-sum game as with the Soviet Union, because of the close interests between the US and China. The door is open, not closed.

> What is the status of China’s proposals to promote military cooperation with South-East Asian countries?

There is now no military cooperation. We should have regular defence ministers’ consultations and exchanges of military personnel.

There should be joint maritime operations for accidents at sea, for example. Also, on non-traditional threats at sea (piracy, terrorism, human trafficking, narcotics, illegal immigration).

There have been exchanges between China and Indonesia, and cooperation between China and Malaysia in producing military equipment.

> How has China’s perception of Asean changed over the years?

China sees the Asean process positively, acknowledging Asean’s role in creating a stable and cooperative region. There is the China-Asean FTA, with other cooperative projects.

All this is quite different from the past.

China hopes Asean can play a stronger role in the region for more cooperation and institution-building. Asean needs to be more united to work cooperatively towards a real Asian century.

Asean can help create a new regional institution. Asia should be a security provider, since there has been too much reliance on outside security providers.

Behind The Headlines By Bunn Nagara

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U.S. intervention not conducive to Asia-Pacific stability

 Many facts have proved that major changes have taken place in regard to the South China Sea since Washington made a military and economic "pivot" toward Asia, a strategy many interpret as a bid to counteract China's influence in the region. 

Since the dispute over Huangyan Island between Beijing and Manila flared up in April, Washington not only held joint military drills with the Filipinos, but also sold two Hamilton-class warships to them. 

Washington must understand that returning to Asia by way of militarily flexing its muscle, and diplomatically intervening in bilateral disputes is wrong and short-sighted.
 
BEIJING, July 14 (Xinhua) -- Hillary Clinton's whirlwind tour of China's neighbors as part of the U.S. pivot to Asia strategy has made waves again in the South China Sea. The "strategic pressure" is not conducive to Asia's development or U.S. long-term interests.

The U.S. secretary of state's Asia trip, which took her to Afghanistan, Japan, Mongolia, Vietnam, Laos and Cambodia, was nothing but an apparent "diplomatic encirclement."

Though wary of overtly irking China, Clinton further meddled in the South China Sea issue by repeatedly highlighting America's interests there and openly supporting individual ASEAN members' scheme to complicate the maritime dispute.

Clinton also extended her hand to the East China Sea, clearly recognizing during the visit to Japan that the Diaoyu Islands fell within the scope of the 1960 Japan-U.S. security treaty, though Washington does not take a position on the ultimate sovereignty of the islets.

Many facts have proved that major changes have taken place in regard to the South China Sea since Washington made a military and economic "pivot" toward Asia, a strategy many interpret as a bid to counteract China's influence in the region.

In the past decades, there has been mainly a lull in the South China Sea issue, as China and other claimant states sought solutions based on bilateral friendly negotiations.

However, at the ASEAN foreign ministers' meeting two years ago, Clinton announced Washington had a "national interest" in the South China Sea and would return to Asia. Since then, tensions have been simmering below the surface.

In particular, China's maritime territorial sovereignty has been severely infringed this year, with the Philippines laying claims to Huangyan Island, Japan's farce in attempting to buy the Diaoyu Islands and Vietnam's enactment of a law asserting sovereignty over the Xisha Islands and Nansha Islands.

The United States claims it does not take a position on the one hand and intensively takes one-sided actions on the other.

Since the dispute over Huangyan Island between Beijing and Manila flared up in April, Washington not only held joint military drills with the Filipinos, but also sold two Hamilton-class warships to them.

Last month, U.S. Secretary of Defense Leon Panetta announced a shift of deployment of the U.S. Navy from its current 50-50 split between the Pacific and the Atlantic to 60-40 by 2020.

As the Chinese saying goes, "the tree craves calm but the wind keeps blowing." Though China always exercises restraint and insists on diplomatic solutions to the disputes, some countries keep challenging China, which certainly has something to do with U.S. re-engagement in the region.

President Barack Obama's strategy to focus U.S. foreign policy more intensely on the Asia-Pacific after a decade of wars in Iraq and Afghanistan is welcome, as long as it is beneficial to the peace, stability and prosperity of the region. However, what the strategic shift has brought in the past two years is evidently contrary to regional stability.

Washington must understand that returning to Asia by way of militarily flexing its muscle, and diplomatically intervening in bilateral disputes is wrong and short-sighted. It is wrong because it is favoring confrontation instead of cooperation, which does not contribute to Asia's development and also goes against U.S. long-term interests.

Americans should do more to promote regional and win-win cooperation rather than mess up peace and development in the Asia-Pacific region.

Related:

News Analysis: Clinton's visit promotes U.S. strategic pivot towards Asia

SINGAPORE, July 13 (Xinhua) -- Regional and international economic cooperation is important, analysts said on the visit of U. S. Secretary of State Hillary Clinton to Asia.

Clinton participated in the 19th ASEAN (Association of Southeast Asian Nations) Regional Forum on Thursday in Phnom Penh, which gathers the foreign ministers of Asian countries and beyond. Clinton's visit to Asia has also taken her to countries such as Japan, Mongolia, Vietnam and Laos. She is also expected to attend an ASEAN-U.S. Business Forum on Friday. Full story 

Saturday, July 14, 2012

Our cars are costing us our homes!

WHEN I first started my job as an architect in the 1960s, I was on a three-year contract with a monthly salary of RM628. I bought my first car, a Peugeot which cost RM7,724, equivalent to approximately one year of my salary. The car became my reliable companion for 14 years. Those were the good old days, when a car could be bought with just one year of a fresh graduate's salary.

Circumstances have since changed. Today, for a fresh graduate to own a car in Malaysia, it will easily cost him four years of his salary to purchase a foreign car, and even a local car costs around two years of his salary. If we take into consideration his living expenses and other commitments, it may take him even longer to settle his car loan. Hence, it has left him with very little option but to take the maximum car loan financing tenure of nine years.

In the table illustration below, a fresh graduate in the Washington D.C. earning about RM11,000 (about US$3,500) per month can easily buy a Japanese Honda Civic or Toyota Corolla worth RM50,000 as it is only 0.4 times of his yearly salary.

On the other hand, a fresh graduate in Malaysia earning about RM2,500 per month needs to pay RM120,000 if he would like to buy the same type of car. It costs him four times his gross yearly salary. This ratio is 10 times higher than his US counterpart.

For youths in Malaysia, buying a car is more expensive both in real terms, and in terms of debt-to-income ratio. In reality, it means they have to either purchase a car with lower price tag or commit to a longer term loan to own a car, which cost them the opportunity of owning a home.

This situation requires our youth to choose between buying a car or a house first, and many have committed to own a car first, considering our public transportation system is still in the process of being improved.

Many fresh graduates in Malaysia who start to serve their car loan tend to delay their plan of purchasing a home.

Unfortunately by the time they can afford to purchase a home, be it three, five or nine years later, the price of a property would have escalated due to among other things, inflation, higher construction cost and higher land prices.

While it may be safe to say that their salary would also increase, generally speaking the increment may not aligned to the rate of inflation. In most cases, owning a home will be a huge debt lasting 30 to 40 years of housing loan repayment.

What can be done differently to change the circumstances? Is there a better way for them to financially plan their future? These are questions that Malaysian youths ought to consider before purchasing any big-ticket items.

Let's look at the table again. It also lists the median price for three-bedroom apartments in the suburbs of these cities. The median price of an apartment in the Klang Valley is around RM300,000, equivalent to 10-year gross income of our fresh graduates. The affordability level is more favourable compared to other Asian countries, such as Indonesia and Thailand. The prices of same size apartments in Jakarta and Bangkok range from RM350,000 to RM400,000, and costing their fresh graduates 13 to 18 years of gross yearly income to purchase a house.

Therefore, when it comes to the question of home affordability in Malaysia, we are blessed compared to our regional peers.

However, there are many factors that contribute to the challenge for our youths to own a house. Two primary factors are the additional financial commitment of purchasing a car, and the relatively lower income level in our country compared to our Western counterparts.

When fresh graduates spend a substantial amount of their salary paying for a car, they are left with little savings to own a house, and their house affordability level decreases over the years as prices rise due to inflation.

Clearly the income level of our graduates has to rise, to enable better quality of living and higher affordability level, which is the current government's focus to make Malaysia a high income nation by 2020.

Perhaps it is also time to re-look at our national car policy and how it has affected the house affordability level in Malaysia. From the numbers above, it is clear that our cars are costing us our homes.

Food for thought  By DATUK ALAN TONG

> FIABCI Asia Pacific chairman Datuk Alan Tong has over 50 years of experience in property development. He was FIABCI World president in 2005/06 and was named Property Man of The Year 2010. He is also the group chairman of Bukit Kiara Properties. (email at feedback@bukitkiara.com) 

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